Question

Assume the current date is 3/25/2020. Tom, a new tax client, has hired you to prepare his 2019 income tax return. Upon reviewing his old returns, you noticed many errors. How would you answer the following questions?


b. You determined that Tom has overpaid his tax on his 2016 Income Tax return because he failed to deduct his medical expenses. The additional tax refund to Tom would be $ 1,800. Tom filed his 2016 tax return on 3/1/2017. What is your advice?



c. Tom’s 2015 income tax return contained an error in calculating a deduction. He underpaid his tax by $ 250, and is worried that the IRS will come after him. Tom filed the return on 7/18/2016. Does Tom have cause for concern?

d. After talking about the 2015 return, Tom told you that he also had an issue on his 2014 return which was filed on 2/20/2015. The Gross income reported on his tax return was $ 50,000. Tom explained that he inadvertently left off $ 15,000 in income from the return believing that it was tax free. After discussing the item with you he now realizes this was taxable. Does Tom have cause for concern?

e. You complete Tom’s 2019 tax return and he owes an additional $ 18,000 in tax. Tom tells you to file an extension, because he cannot pay the amount due in full. What is your advice to Tom?

Answer 1

As per the given information the calculation and procedures are as follows:
b. In this case TOM cannot get the refund of $ 1800 which need to be get back
which are paid excess while filing tax returns because the time limit to file
revised is three years from the date of filing which expires on 2/28/2020.
Here the given current date is 3/25/2020.
c. In this case the Tom have cause for conern because there is an error
while calculating the deduction. TOM not did this intentionally for evasion
of tax and he himself identified the mistake not IRS people
d. In this case TOM advertently $15000 exemption in the year 2014.
Tom has concern for not levying penalty but he has to pay interest
on the amount which are payable to the department.
e. My advice to TOM to pay now without asking for the extension because
this amounts need to pay by TOM in 2014 & 2015 itself and the interest
on the due amount of need to be paid for the extention period. Instead of
that take unsecured loans from the people and pay the income tax dues.